Thursday, August 30, 2012

IGB primed for RM4.6b Reit IPO launch

Business Times: Tue, Aug 28

ITS launch in 1999 of the Mid-Valley Megamall - South-east Asia's largest - during the Asian financial crisis might have been unfortunate, but IGB Corp appears to have got the timing right for its RM4.6 billion (S$1.85 billion) retail real estate investment trust.

IGB Reit is expected to ride on the positive momentum generated in the wake of large successful initial public offerings (IPOs) by Gas Malaysia, planter Felda Global Ventures Holdings and Integrated Healthcare Holdings, which put the country near the top in public share sales this year.

As a stable defensive alternative, Reits are currently enjoying resurgent investor interest. Market players say most Reits are trading at a peak, which in turn has resulted in a dip in yields.

"Looking at other Reit prices, I think it's a fair price. In fact I wanted it higher," declared managing director of IGB Reit Management Sdn Bhd Robert Tan of the RM1.25 apiece initial retail price.

At that price, the reit is forecast to provide a distribution yield of 5.1 per cent on an annualised basis and 5.4 per cent for the six-month forecast period ending Dec 31, 2012, as well as full-year 2013.

The IPO of 670 million units will raise about RM838 million. The trust intends to distribute all of its distributable income from the date of establishment to end-2014, and then to give out at least 90 per cent.

At the launch of its prospectus yesterday, Mr Tan said Megamall and The Gardens Mall, which make up its initial portfolio of assets worth RM4.6 billion, could still see annual revenue and earnings growth of 5-8 per cent, conservatively.

Having survived the financial crisis, the Megamall has never looked back and is never short of tenants. Together with The Gardens, it forms part of the 20-hectare mixed development called Mid Valley City. The Gardens is not far behind at 99.6 per cent and Mr Tan believes the "higher-end" mall now has greater growth prospects given its superior average consumer spending.

Both malls have a combined net lettable area of 2.5 million sq ft, and recorded an aggregate footfall of 34.7 million last year.

Shoppers have been known to circle for an hour to get into its car park, and then hope for luck to find a parking space.

"All our tenants are doing very well," Mr Tan said, noting an 8-10 per cent increase in annual rental turnover was more than achievable, growing competition notwithstanding. IGB owns 51 per cent of the Reit which market capitalisation will amount to about RM4.25 billion.

The planned South Key mixed development in Johor would eventually be injected into the Reit in 3-5 years, he indicated, adding the trust is also looking to the US and Europe "to acquire some properties at below replacement costs".

To be listed on Sept 21, the trust is set to be the biggest listed retail reit in the country, until perhaps when KLCC Properties unlocks its assets including the Suria Mall at the Petronas Twin Towers.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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